Answer:
According to the sticky-wage theory, the economy is in a recession because the price level has declined so that real wages are too
⇒HIGH. According to this theory, the increase of real wages will result in lower production levels and lower employment.
According to the sticky-price theory, the economy is in a recession because people expect prices to rise quickly in a recession.
⇒TRUE. The sticky price theory is based on the concept that prices will not change quickly enough to adjust to a new optimal equilibrium level.
According to the misperceptions theory, the economy is in a recession when the price level is what was expected.
⇒FALSE. According to this theory if the price level decreases, suppliers will reduce output levels resulting in a recession.
